Housing Bust Arrives at Doorstep of NYC

Scary - I wouldn't be shocked to see prices down at least 50% in Manhattan by the time this is all over....

Riiiiiight.....

Prime Manhattan real estate on Fifth Avenue in the UES across from Central Park, or in the Greenwich Village Historical District - down 50%.

Riiiiiight.....

http://www.observer.com/2007/manhattan-condoland

But they continue to sell . . . 50%?

Not in your, mine or anyone's lifetime unless the place is flattened by a nuke. Then, I would say a 20% drop with a pop after the radiation clears.:)

remember those words markznyc, you will live to eat them (and your hat if you have one)

Prices went up at 100%/yr or close to it for years. I don't see why a 50% drop over a number of years is unreasonable - particuarly if bonuses dry up and bankers get laid off. For a number of reasons this would lead to a collapse in RE prices - #1 - laid off bankers who bought at high prices will no longer be able to afford their monthly paments and will flood the market with their overpriced condos/co-ops and #2 bankers with no bonuses will not be able to afford the outrageous and ungrounded prices that exist in the market today. Lawyers/doctors will have a somewhat steady salary, but they can't even afford to buy a decent apt. in this market today. Prices will have to come down.

It all depends on how many people are over-leveraged and how many of them are unable to make the payments.

I just don't buy all of the doom-and-gloom politics. C'mon guys, it's the Manhattan market. It's not Ohio, South Florida, or Phoenix. Get a grip, a 50% drop here would be 100% in those areas. So some of Wall Street won't get bonuses this year, big whoop! Many people who haven't bought yet will start to find out that although there is (at worst) a stagnation in sales, it won't last. There's too much money in this city with many people in various industries unaffected by this sub-prime, credit mess. Why did a condo just sell in my building for 5% above asking? No foreclosures will occur in the NYC area and people are always moving here. MMafia, if you're going to use Mad Money Man as your basis, can I use Scooby Doo to predict how much my condo appreciates by 2012?

"MMafia, if you're going to use Mad Money Man as your basis, can I use Scooby Doo to predict how much my condo appreciates by 2012?"

Surely you can- I don't really are about the content of these articles as they are mainstream media blasphemy.

The point I'm trying to make is that the number of these gloomy articles regarding Manhattan real estate is increasing, which will affect the psychology of the market. We all know what happens when the ship finally completes its turn.

Re: #8

Don't forget that what made the asking prices for so much Manhattan RE reasonable is that the cheap environment for borrowing money allowed lots of buyers to stretch that high. When you have to pay, say, $7 per thousand monthly for a 30-year mortgage (assume a 7.25% rate), vs. only $6 a year ago (a 6% rate), that's going to have an impact on how many people can afford to pay the current prices. So, in the best case, prices don't fall that much, but the properties on the market move a lot more slowly. And those people who HAVE to move could have to accept a haircut in order to do a deal.

So for people who can afford to stay put, there's not a problem - - as long as they don't have to refinance. But current selling prices for those transactions that close are more likely to face some downward pressure, it seems to me.

Here's a good example of what I mean (today's WSJ):

"The fluid market is frustrating sterling borrowers such as Orange County real-estate agent Valerie Torelli, who recently sought a mortgage for an investment property she bought in Costa Mesa, Calif. She considered a 30-year fixed-rate mortgage of at least $450,000 for the house, which she plans to rent out until the market improves. She says that despite her high credit score of more than 800, lenders wanted 8.75% for a stated-income jumbo loan or 7.25% with full tax documentation, which she didn't want to provide. The average 30-year fixed-rate for a nonjumbo loan, known as a conforming loan, is currently 6.64%, according to HSH Associates."

50% is not going to happen. Unless there is a worldwide, massive depression similar to the one in the 1930's or late 1800's, unemployment rate is 15%+ and we are living on the set of Soylent Green it is just not in the cards. Inflation, combined with other growth pressures make it very improbable that if the actual prices do decline in real terms they won't decline in current $$ value.

I still am not sure what the motivation is for all of the drastic statements that are being made (always by the same posters). They don't provide realistic guidance (but make good fodder for message boards!). The credit crunch/subprime mess will force a market clean up and a year from now we will be worried about oil prices again.

R/E in this town is a permanent asset that will continue to appreciate over the long run (3-5 years). The time of flipping is over. Market will calm and stabilize, inventory growth will slow and you will see more reasonable market.

If you bought, sit tight and enjoy your place. If you are looking to buy, you may get a 5-10% discount through Q2 of 2008, but not much longer after that. If you are looking to sell, not the best time, but my guess is that unless you bought in the last 6 months, you will still make money . . .

Finally, someone bullish on Manhattan RE admits that "you may get a 5-10% discount through Q2 of 2008". Question for you markznyc; do you think that after Q2 of 2008 Manhattan RE will be back into an uptrend, if so, why? I think the disappearing Wall Street bonuses of Q1 2008 will simply increase the downward pressure from there, into Q2 and beyond.

I think the bonus effect is overrated in both directions as a market indicator.

Maybe it is just from a personal perspective (I'm no Wall Streeter), but I think the bigger factor is the overall psyche of the marketplace (which is what MMAfia has been beating the drum about), which will be poor until the word "sub-prime" (like the word "S&L") has been beaten to death and every idiotic pseudo-newshow (just try and watch the Today show discuss this without gagging) is done flogging it and every soccer mom in Wisconsin has moved on to the next overblown crisis. (Bad food, poisoned toys . . .)

I think this point will be after mid next year, prior to the elections. Again, this is just my gut based on my own expereinces buying and selling over the last 15 years.

So -- no massive drops or pops in the next year. After that . . ?

I agree: the bonus effect is more of an invisible force that drives/reinforces the market rather than it hinging on the market's success. Sure it helps, but as another humble non-Wall Streeter, during this downswing, we may be rescued by foreign buyers buying on the cheap and anxious sellers remaining patient. While the real estate psychology may be stagnant/poor for the next 8-10 months, this period may introduce more first-time buyers to the market that believe their time is now to get into the game. Granted the 30yr rate is ~1.5% higher than 6 months ago, when this lowers, we'll see steady growth -- especially in the 1-2 BR market (to hrdnitlr's point about buyer's reality check on how much they can afford/stretch).

Very few fist time buyers can afford a 1MM 1bedroom apartment, and fewer of them would take on that kind of debt in this crazy market. Prices have stretched to the limit if the bankers don't make more money to keep the market afloat.

Sorry, curious007, but the Euro has already slipped 3% this week and it has another 10% to 15% before all is said and done.

So much for your rich foreigners.

The dollar gained against the euro but plunged against the yen, as the Japanese currency rose to a 5-month high against the greenback.

And all of a sudden the Japanese will start buying here? get real.

Euro down another 1%.

They are already buying up downtown. Half my building (tribeca) is asian . ..

http://nymag.com/news/intelligencer/31826/

Having the Chinese and Japanese come in and start purchasing up real estate in NY doesn't sound so off the wall. The Chinese have billions they want to invest and with dollar weakening against the Yen - they could practically buy dozens and dozens of buildings. Just call them landlord.

So now the Chinese are owners of Japanese Yen? Because their eyes look the same?

um, the article says 95% of the buyers are American born....not exactly rich foreigners.

#22 - Let me guess,...Your great grandfather married his grand-daughter and then they had you. So that makes you retarded.

I'm my own grandpa

International buyers... anyone? A very large percentage of the new development downtown has been purchased by Chinese Americans. We should absolutely be concerned about the sub prime crisis in this country having it's effect on New York, but shouldn't we also consider that New York is one of the most visited and desireable places to live in the world? Shouldn't we compare the health of it's real estate market with international cities of it's caliber such as London, Hong Kong, etc?

I am a dumbass for paying such high prices for real estate.

I am a dumbass for paying such high prices for real estate.

I am a dumbass for paying such high prices for real estate.

I am a dumbass for paying such high prices for real estate.

I have learned my lesson.

r_p_doyle:

It looks like you are living in your own world ...
I can tell you that NYC is *not* one of the most desirable places to live in the world. I have friends and family who live all around the world: France, Spain, Italy, China and Hong Kong. They are barely interested in coming to visit NYC. Some would just to take advantage of the weak dollar ... How pathetic ... Two weeks ago I was in a hotel in Shanghai. I turned on the TV and watched CNN: murders in Newark, Bush administration and the Irak war quagmire, falling dollar, ...

No offense, Millefeuille, but who really cares where your friends and family want to live? A falling dollar is good if you're a foreigner looking to invest in NY real estate. As for Newark, that might as well be "Irak" for all it matters to wealthy Euros shopping for a pied-a-terre.

I just wanted to share the opinion of some foreigners I know. It is meaningless to make over-generalized statement as r_p_doyle did.

Millefeuille, we're not listening to you anymore because you just said "Irak".

Anyway, I think a testament to the strength of real estate in this city is 9/11. The New York City real estate market was subjected to something as close to "a nuke" (as markznyc said) as could ever be possible. And prices rallied back and surpassed highs in the years before.

millefeuille:

Without giving away private information, why don't you tell us where you were born (country only), and where you live now (country, and if you feel comfortable, city). I'd be curious.

#28/millefeuille, so you think people would only want to come to NYC because of the weak dollar and nothing else based on soundbites from CNN?? Now that's pathetic.

NYC enjoys one of the lowest crime rates of all cities in the US. And based on my experience I don't think you can say that Hong Kong or London are much safer.

If you think US policy in Iraq makes NYC a bad place to visit then stay home, make room for the thousands of other visitors who can appreciate what NYC has to offer.

#28--"Two weeks ago I was in a hotel in Shanghai. I turned on the TV and watched CNN: murders in Newark, Bush administration and the Irak war quagmire, falling dollar, ..."

What you were watching was CNN International which is vehemently anti-american. I happened to be in Europe during the Katrina disaster and their coverage made me literally destroy the television set in the hotel. I emailed the anchor personally (his name escapes me Jim something and we had a back and forth on hi deplorable coverage) but he's a Canadian and the anchors are all non-american. Europeans hate and are jealous of Americans. This we all know. However, when they need something, be it military assistance, grain subsidies, what have you, they come grovelling to us privately and publicly decry us as imperialists. Similar to what the middle eastern countries do, really. Plenty of flks prefer living overseas, particularly HK due to lack of taxation, however, I do know that as an expat its a lonely existence and Europe, lets face it, has unbelievably high taxes and the only way to enjoy yourself there is to be fabulously rich or work tax free as an ex-pat for a year or two then come back here. Look around NYC--its FILLED with ex-pat Europeans not to mention tourists. If it is so bad here, why do they come? Why?

I might add that CNN International purposefully puts Canadian anchors on the air because they sound like Americans and Europeans love it when they think Americans are giving bad news about America.

Pseudonym: Was born in Asia, moved to Europe when I was one year old, recently moved to NYC.
Just to answer your next question: didn't come for the American dream, was studying one year in NYC when I met my wife.

I enjoy living in NYC, don't get me wrong. I just think that people who believe that the whole world wants to live in NYC is simply wrong and unrealistic.

Uptowngal: Some do unfortunately. Do you know that a round trip flight from Europe to NYC is almost twice as cheap as a round trip from NYC to Europe? I came back from Hong Kong last Sunday. I am not sure when you were there the last time. I felt safer there.

Randomguy71: I never watch and don't like CNN as most of the Europeans I know. But whenever I travel, that's the only news channel they have a the hotel ...

#37--Again what you were watching was CNN International which is (amazingly) left of CNN USA. Hopefully FoxNews will be carried internationally but my suspicion is that there's not much appetite abroad for a pro-american news agency. Frankly its irritating that foreigners (wherever they are from) come here and comment on how great their birth country is. I appreciate the diverse cultures of foreign lands and truly enjoy visiting them, even would live there if the correct opportunity arose but I'd never dream of running around saying how great the USA is and how my adopted country basically sucks (unless it was France--just kidding). When in Rome, or in this case, When in New York... I've lived here my entire life and have never been mugged, robbed, raped, sodomized, what have you. I have been chased, yelled at, cursed at, spit on, and called racial names (I'm white), but those are minor nuisances. Its a safe City. Perhaps you feel safer in HK because you know it better. When I travel to random European countries I sometimes feel unsafe because i don't know the area and don't speak the language. Asian countries are generally safe, particularly HK but thats a cultural thing.

Some of us see and believe what we want to. millefeuille, I think you should go back to Hong Kong.

I did not say that my birth or home country was much better. There is no such thing as a perfect country. Randomguy71, most of what you said makes sense.

Uptowngal, I was not born or raised in HK. I probably spent less than two weeks in my whole life in HK. So I am not sure why you said that I "should go back to Hong Kong". Anyway I was hoping not to hear this kind of xenophobic remark. I guess it was too big of a temptation.

"......I came back from Hong Kong last Sunday. I am not sure when you were there the last time. I felt safer there."

Quote from someone who doesn't like NYC based on images from CNN Internationa and the war in "Irak"

NYT article today said a housing collapse in Manhattan and parts of Blkyn is not happening.

NYT is a shill for the real estate industry - it has NO credibility when it comes to real estate and quite frankly anything they print about NY real estate is shameful to the newspaper - it is all RE propaganda.

Right anon3 - it's ALL shameful, shilling, propaganda, with no credibility - unless it supports your 'little black arrows pointing down' pov, which you've been posting on streeteasy now for HOW long, exactly?

Millefeuille,

You're so full of shit it isn't funny. If the whole world doesn't want to come to live in New York, why do people from all over the world -- rich and poor alike -- come to live in New York? And, with all due respect, what the fuck do "Irak," the Bush administration and Newark have to do with living in New York? I suppose you think human rights violations by the Chinese government make living in Hong Kong intolerable, right? No? Then surely you must wonder why anyone would live in Paris when gangs of Islamic "youths" roam the streets vandalizing property and attacking Jews? No?

Sorry, but your anti-Americanism isn't going to change the indisputable fact that New York is one of the most appealing places to live in the world. Get used to it.

millefeuille:

A serious question, not intended to be xenophobic - in a 'best case scenaro,' would you prefer to move with your wife to Asia, or Europe? Do you have to stay in NYC due to job security or political reasons? I guess I'm wondering because if you're not as keen on NYC as you might be some other city (or country, for that matter), why not move? I certainly would!

Pseudonym: Thank you for your advice, but there are already things in the works. I didn't wait for you ;) Again as I said I am here because of my wife. She is in the process of getting the citizenship from my home country in Europe.

millefeuille:

Would you feel comfortable sharing what country and/or major city you're moving to? Just curious....I'm just wondering what you prefer to NYC - always interesting to hear differing opinions on where people live and why.

pseudonym, I think we've heard enough of millefeuille's comments. Sounds like he wouldn't be happy living anywhere.

Pseudonym: we are having an interesting conversation. But I am not sure this is the right place to discuss all that. As I said there is not perfect city or country. If I didn't like NYC I would not have come to live here (besides the fact that I met my wife here). Some of you read too much into it. I am a young professional working at a world reknown company contributing to its success. I pay my taxes. I like how easy it is to create business opportunities here. Most stores and restaurants are open 7 days a week. I can call my bank at any time of the day and night. On the other hand I like better the health care system and the free educational system in certain European countries. There is much more to say about the differences, the pros and cons. Again I don't think this is the right place for such a debate.

millefeuille:

Well, if you really feel that "...I don't think this is the right place for such a debate..."

Why did you make a statement like "...It looks like you are living in your own world - I can tell you that NYC is *not* one of the most desirable places to live in the world. I have friends and family who live all around the world: France, Spain, Italy, China and Hong Kong. They are barely interested in coming to visit NYC....Two weeks ago I was in a hotel in Shanghai. I turned on the TV and watched CNN: murders in Newark, Bush administration and the Irak war quagmire, falling dollar, ..."

I mean, I'm not accusing you of being unprofessional, not paying your taxes, etc., all I'm asking is what country (or major city) you're moving to, because it's interersting for comparative purposes. But if you don't want to discuss it, you're certainly entitled to not have to. But don't post earlier statments like the one above, then basically say - "oh, I don't want to talk about it." That's puerile.

To all the idiots attempting to make fun of this guy because he uses the derivation "Irak" instead of "Iraq", you are all imbeciles. I know that its the correct spelling at least in Turkish, possibly other european languages. Perhaps this guy is from Turkey, which is a beautiful country. The fact that you attack this guy for that is astounding and sad. Probably why so many foreigners hate us so much, because we have so many small minded individuals who cannot comprehend that other people might, gasp, speak another language. I am equally disgusted at foreigners who come here and dengrate our great country but also recognize that they come from countries which are also great in many ways. That and they speak several languages whereas (most of us) speak one, and badly (usually).

"Irak" is the correct spelling in a lot of European languages. So what? After this joker comes on a New York real estate board to tell the assembled New Yorkers that -- contary to what their and everyone else's eyes, ears and brains tell them everyday -- New York isn't in the upper echelons of desirable places to live among foreigners, giving him the needle by quoting "Irak" back to him is "astounding and sad"? Are you kidding me? If "so many foreigners hate us so much" because we don't just swallow their reflexive anti-American bullshit, and dare to stand up for ourselves, that's their problem.

I am elated to see so many New Yorkers finally standing up to individuals who come to our country to reap the benefits, and then trash us. There are few other places in the world where foreigners can go and establish very comfortable lifestyles AND be welcomed and accepted so readily into our society. This is especially true of NYC. Most countries take care of "their own" and have policies that do not permit foreigners to so easily partake in services and job opportunities. Americans need to stand up and demand some respect for all that we do for immigrants and others who we have welcomed with open arms. Millefeuille you hit a sore spot with me and I say to you "Bon Voyage".